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Nearly every entrepreneur has heard the refrain, "Get back to me when you have some traction", when seeking funding. From an unsophisticated investor, this response might be a non-confrontational way of saying "No." However, when uttered by most Venture Capitalist (VC) it conveys their desire to obtain validation of your venture's value proposition from dispassionate, objective third-parties. In this context, your "value proposition" is defined as the utility you claim users will derive from your solution.

When you hear the word "traction" think "objective validation." Once people who do not know you and have no vested interest in your company's success begin expending their time, money and resources to leverage your value proposition, you are gaining traction.

Triangle Of Evidence

Evidence of validation manifests itself in many forms and is derived from a variety of market forces. Five broad sources of independent, third-party validation are: Customers, Partners, Distributors, Industry Experts and other Stakeholders. Each of these constituents are represented below in the Triangle Of Evidence that you must build in order to demonstrate that your venture has achieved meaningful traction.

The Inequity Of Validation

Not all validation is created equal. For instance, validation that directly supports your company's underlying value proposition is more valuable than corroboration that indirectly suggests customers might ultimately adopt your solution. As shown below, the most impactful form of traction is when your venture repeatedly convinces rational, third-party customers to happily part with their hard-earned cash, at a market price, in exchange for your solution.

However, not all ventures are mature enough to generate paying customers. Fortunately, for such startups, there are a number of precursors to paid customers, such as: trial users, freemium customers and qualified prospects.

In some industries, lengthy Pilot tests are required before an enterprise customer will sign a definitive purchase order. In such cases, always extract meaningful compensation from these Pilot customers to offset your costs and to increase the likelihood that the Pilot user will convert to a paying customer. Free Pilots typically have a lower conversion rate, as the lack of a financial decision at the outset of the relationship reduces the thoughtfulness in which the prospect enters the Pilot.

The following manifestations of traction are not intended to be an exhaustive list. Rather, they serve to illustrate the relative value of common sources of validation, from the most to least impactful.